Give your kids college savings if they win a full scholarship?

[meatface]

Hypothetical:
You have saved up the full amount to pay for your kid's 4 years of undergrad. Your kid turns out to be super smart, wins a full scholarship, and accepts that full ride. Would you give your kid that cash instead, or would you keep it for yourself?

For the sake of this hypothetical, assume the money is easily available and not in a 529k (tax-advantaged college savings plan).

[shawndoggy]

Interesting question. In my kids' case(s), the money that isn't in the 529 is already "theirs" because it was gifted to them by great grandmother and grandparents. But there is also 529 money that we saved for them.

Our thought at the moment is that even though kids have good scholarships it is too early to tell what they might need for grad school etc.


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[mm1970]

Hypothetical:
You have saved up the full amount to pay for your kid's 4 years of undergrad. Your kid turns out to be super smart, wins a full scholarship, and accepts that full ride. Would you give your kid that cash instead, or would you keep it for yourself?

For the sake of this hypothetical, assume the money is easily available and not in a 529k (tax-advantaged college savings plan).

I'm keeping it!  And the 529 too.  Or it goes to kid #2.

[Chris22]

Not an all or nothing answer.  I'm not keeping it all for myself, but I'm not handing my kid $100k in cash, either.  I would probably keep some (half?) of it for myself, and put some aside for the kid for perks such as maybe buying her an inexpensive car (depending on logistics), paying for her to go on a spring break trip or two, and giving her substantial money after graduation to help get her life started.  I received a full scholarship to college and that's exactly what my parents did for me. 

[Livingthedream55]

That exact scenario happened to me. My parents kept it. I was pretty hurt by it. I never knew how much it amounted to  and it turns out none of my other siblings ever went on to college (very chaotic, dysfunctional family) but ya, it hurt because I had heard for years that they had an account for me and I knew it included money gifts from relatives over the years.

Edited to add: Oh and I went on to grad school right after college and took out loans and they never offered me any help paying for that either.  Sigh

[LM123]

This was actually my situation when I started undergrad about 6 years ago. My parents saved up $30,000 which would have covered my cost of tuition at a state school. I received an academic "full ride" from an out of state institution and decided to accept it. This scholarship covered my tuition costs but not living expenses. My first year of college I stayed in the dorms with a meal plan as was required which cost about $10,000. I paid for that with my parents college fund. The next 3 years I worked as a resident advisor which allowed me to stay in the dorms with a meal plan at no cost. However, I still spent the entirety of my college fund. The remaining 20,000 spread over 3 years allowed me to spend ~$500 a month. Out of this I paid for textbooks, my cell phone bill, car insurance, car repairs, went to the grocery store on occasion, ate out approximately 1x per month with friends, went to the doctor and dentist and optometrist, traveled home for holidays, purchased new clothing including professional wear for my degree, etc.

What I'm trying to say is do not assume a "full ride" means that anything other than tuition is covered and do not assume even if room and board is covered that students will not have additional living expenses. Perhaps your hypothetical college fund is much larger than what my parents provided for me. Wonderful! Consider that they may learn a lot by being given control of such an account. When I turned 18 this account was given to me and I guarded it carefully and stretched it out to last my entire 4 years of college. They made it clear that no more money would be given to me for college expenses. This was a MUCH more beneficially exercise than if my parents had simply given me money each time I needed it. My father also made it clear that if I didn't touch this money it would continue to grow (in a vanguard account) and someday I could use it for a downpayment on a house or other large expense. If your kid can handle delayed gratification that is a big motivator!

However, I did have classmates whose parents gave them control of large sums of money at 18 and it was gone by the time they were 19. So it really comes down to your kid and their maturity level. I'm certainly biased in favor of giving the money to the child but I'm interested in hearing from individuals who believe that parents should keep it instead.

[Vindicated]

It's already set aside for the child.  If the child doesn't need it for school, I'd likely move it into a retirement account.  I'd then set an age at which the child can access it.  Maybe 30 y/o or something.  Hopefully by then they have their own savings, and just use this for a down payment on a home or something.

[Bird In Hand]

We'd likely hold onto the money and use it to help out with things like a car, downpayment on a house, funding the child's IRA, paying for a wedding one day, etc.

My parents didn't have much money and helped me pay ~1/2 of out-of-state private university tuition + living expenses (my own jobs + grants covered the other 1/2).  They also gave us $10k toward the downpayment on our first house.  I've always been grateful to them for this, and I'm not so sure I would feel the same way if they just handed me $50k or whatever after graduating from college.  I don't think I would have spent it very wisely back in my early 20's.

[Much Fishing to Do]

I consider my 529s what I plan to give to my children before their actual inheritance (if there is anything left).  It is the cost of Tuition Room and board at our state school for 4 years.  I seriously hope they get scholarships or find some other way to keep from having to give all this money to the school, and they can use this for house down payment instead, etc.  I certainly would not hand any of them this in cash until they seem responsible enough to handle it.

Given 529s dont apply the 10% penalty up to the amount of scholarship received, and only the gains are taxed, and if distributed to your kid those gains are taxed at their tax rate, I dont even consider it being in a 529 a barrier to plan, perhaps just means the distributions will be spread out over more than one year to keep from hitting a new tax bracket.

[shawndoggy]

What I'm trying to say is do not assume a "full ride" means that anything other than tuition is covered and do not assume even if room and board is covered that students will not have additional living expenses.

Yeah, this.  My son just got a "full ride" (4 years full tuition at private university beginning fall 2017).  We will still need to cover housing expenses of approximately $12-14k a year, books, travel to and from, etc etc.  Even this "free" education can be expected to cost north of $70k.

[Pigeon]

We have a certain amount put aside for 4 years room, board and tuition at a state school.  Both kids are likely to go to grad school (professional programs with very low chances of any sort of financial aid) , so they can use the funds for that.  We are also likely to give each a modest sum on graduation that they can decide how to use.  (Car, down payment, save for wedding, etc.)

[aetherie]

I was the kid in your scenario, except the money was/is in a 529. My parents paid my room & board out of it and then signed the rest over to me to be a college fund for my (future) children. I feel very lucky to know that money is there and will have another ~20 years to compound before being used.

[FireHiker]

My first goes to college in two years; hard to believe. I doubt he will get a full scholarship with his grades, but ??? As it is, we haven't saved anything specific for college, although he knows we will pay for his undergrad degree, up to the cost of a Cal State or UC, or equivalent money towards a private school with him on the hook to come up with the difference. Fortunately he really wants to go into an environmental field, so he's eyeing Humboldt's Environmental Resource Engineering program. With our two high incomes we will just pay as we go for the four undergrad years. We have enough fluff in our budget to cover it, although I will have to up my travel hacking game since we will no longer have a travel budget during that time.

If it were a situation where there was a 529 with money that had been gifted with the intention of going to my child's college (from grandparents, etc), then yes, I would definitely pass that money along eventually, possibly in the form of a house down-payment or an investment account to kick-start a FIRE path.

[anonymouscow]

It would depend on many things... I would not feel obligated to give them the money. It depends some if you are not on track for retirement, etc.

I might match what they put into an IRA.

Or, it might make a nice graduation gift.

No full ride and no money saved up so problems I have not.

[BrandNewPapa]

A friend of mine promised both his sons that he would buy them a brand new Dodge Viper if they got a full ride.

Neither one got the car (or a college education).

I've set up an "all around" fund for my 1 year old. My plan is to use it for any emergency that may come up in her life (accident, medical condition, etc.) If there is any left when she is 18, we will pay for half her tuition and room/board with it. Beyond that I will use it for her wedding or extra retirement savings for us.

[C-note]

We have 3 kids and all 3 went to college.  All 3 know we have college savings but there was never any specifics on what the college savings account covered for each kid or how much is in the account.
 
Our guarantee for each kid was to graduate with a debt-free undergrad and a paid-for (used) car.  2 of 3 have graduated and obtained that from us.  The 3rd actually got a full-ride through an appointment to a service academy, decided not to stay, and received a full-ride at a small engineering school.  Even though 2 years were completely "free", we don't feel that we owe him anything more than the first two.

We'll probably hang onto the college savings and provide reimbursement for grad school should any child choose to attend.  It will be a bit different than undergrad as the child will have to pay up front and send us their report card.  We'll reimburse the cost of tuition only.

IMO - The college savings don't belong to the child.  The education paid for with the college savings belongs to the child.

[I'm a red panda]

My parents guaranteed that my sister and I would get our bachelor's degrees with no debt. They paid our tuition, our basic living expenses, and provided us with a monthly allowance for spending as we wanted.

My sister wasn't able to get into our state school (not Iowa, I lived in Texas) and went to an expensive private school instead and lived in fancy sorority housing.
I went, on full scholarship, to an excellent state school, lived on campus one year and then in a budget apartment.

They don't owe me anything even though they spent WAY less than what they budgeted for me. They guaranteed I'd graduate debt free, and I did.
The "college fund" wasn't my money; heck- I don't think it was ever a separate fund.  My parents would have just sold stock to pay off the bill when it came.  Nothing was ever in my name, and I was never entitled to extra money just because I could have chosen more expensive options.


They did not pay anything for grad school.

[sokoloff]

IMO - The college savings don't belong to the child.  The education paid for with the college savings belongs to the child.

Damn. That's a powerful paragraph and it's changed my opinion on the matter significantly. (There, you're the one person who changed someone's mind on by argument on the internet today... ;) )

[Mezzie]

I'd keep it and use it for when the kid has big money needs (like, hey -- you saved up a down payment fir a house? Here's matching funds!).

This is extremely hypothetical as I don't have children. :)

[doublethinkmoney]

I have a toddler and we do plan on saving for college. However, we won't be telling her about the fund until probably after she finishes college. Why? That way she has the experience of the value of the money and having work part time through college for spending money but will benefit for a nice surprise/boost after graduating. We will encourage to go to the school she chooses and to use good judgement on costs.

I don't see the reason to tell kids they have money waiting on them or to bank on it. I want her to get scholarships and figure out how to get it done without knowing mommy and daddy's money is there. A big chunk of money in the bank seems like SO much and endless to Kids that age when it gets sucked up quick with ridiculous cost of tuition and books.

I also wouldn't sacrifice my retirement savings for college. You can't get loans for retirement. (Not saying you are)


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[hops]

We don't have kids yet but discuss this a lot. The plan has always been to pay for at least half of their undergrad expenses, but my SO might take a job with a great tuition benefit that would cover our spawn at 100% if they attended her (very expensive) institution or 50% anywhere else. We'd save for college no matter what, just to be safe, but are undecided on what we'd do with that money if tuition wasn't an issue. Probably keep it invested and let it continue growing, knowing it was there if help was needed with grad school, down payment, medical expenses or whatnot in the future. Maybe it could put grandkids through school one day.

[shawndoggy]

You can't get loans for retirement. (Not saying you are)

If you make enough, your kids won't be able to get loans for college either. 

[I'm a red panda]

You can't get loans for retirement. (Not saying you are)

If you make enough, your kids won't be able to get loans for college either.

How much is that?  I know people with supremely rich parents who got loans.

Maybe it's a private vs. federal loan thing? But student loans seem to be available.

[sokoloff]

Availability of subsidized loans may be phased out with income, but I don't think the availability of market-rate loans is affected by income.

[shawndoggy]

How much is that?  I know people with supremely rich parents who got loans.

Maybe it's a private vs. federal loan thing? But student loans seem to be available.

Not sure where the cutoff is precisely. You can mess around with some fafsa calculators to figure it out.

I used this one: https://bigfuture.collegeboard.org/pay-for-college/paying-your-share/expected-family-contribution-calculator#efc_finances

For a family of 4 with two kids in college, making 200000 a year with 500000 in assets and 125000 in home equity, the EFC (expected family contribution) came out to 39,441 per year.  So that's the annual amount that the family is expected to come up with ANNUALLY before eligibility for any federally subsidized loans.

Sure, I'm sure that there are private loans that start accruing interest on day 1 and are co-signed by the parents, but uh no thanks to that.

[shawndoggy]

Availability of subsidized loans may be phased out with income, but I don't think the availability of market-rate loans is affected by income.

pretty sure non-subsidized loans are going to require parent as cosignor, no?  And begin accruing interest from day 1?

[NESailor]

I usually over-analyze everything financial but college is just not something I've thought about much so far.  We have 2 kids - 3 year old and 11 month old. 

My wife and I both went to relatively inexpensive state schools and paid with a mixture of family contribution and A LOT OF HUSTLING.  I was an RA and held down anywhere from 2 to 4 part time jobs at the same time in addition to an academic full ride.  She got some merit scholarships and help from her parents. 

We paid for her masters degree with my income as a newly minted accountant/aspiring CPA. 

My current thinking is that I'm racing towards FI by maximizing savings in retirement and non-retirement accounts.  If we stay on track we'll be technically FI around the time our older kid enter high school.   We can adjust the plan for college then.  Worst case we will work exclusively to support our kids in college.   

We do not plan to offer a large amount of cash in any case - whether they get a full ride or not.

[sokoloff]

Availability of subsidized loans may be phased out with income, but I don't think the availability of market-rate loans is affected by income.

pretty sure non-subsidized loans are going to require parent as cosignor, no?  And begin accruing interest from day 1?

Federal Stafford loans, of the unsubsidized variety, require no co-signer; private educational loans generally do. Unsubsidized loans do accrue interest from day 1 (that's almost the definition of unsubsidized).

Neither factor has to do with availability to students whose parents make too much, of course.

[shawndoggy]

Neither factor has to do with availability to students whose parents make too much, of course.

Great point, though I'd quibble with the "neither factor" argument.  If the idea is to put the burden on the kid, the need to resort to unsubsidized private loans with mom and dad as cosignors is basically mom and dad borrowing for junior's education, with the added kicker that if everything hits the fan, junior's credit will get wrecked right along with mom and dad's.

Further, unsubsidized stafford loans are really modest -- you aren't going to be paying for USC on them.

https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized#how-much

[sokoloff]

There are other reasons that high-earning people might choose to have their kids take out unsubsidized loans that don't necessarily mean they want to leave the kid high and dry. That's where "availability" matters more than terms or costs.

They might have recurring cashflow from a business, real estate holdings, dividends, an installment sale or similar where they want to keep their assets "working" untouched, have the kid take out loans, and pay off the loans from future cashflow. They may object to filling out the FAFSA form over privacy concerns (I probably won't fill it out for my kids; it will be a calculation of how much filling out that form is worth vs what the privacy is worth. Since I expect to get zero need-based aid, there's fairly little point in filling it out just to get loan interest deferment.)

[shawndoggy]

There are other reasons that high-earning people might choose to have their kids take out unsubsidized loans that don't necessarily mean they want to leave the kid high and dry. That's where "availability" matters more than terms or costs.

They might have recurring cashflow from a business, real estate holdings, dividends, an installment sale or similar where they want to keep their assets "working" untouched, have the kid take out loans, and pay off the loans from future cashflow. They may object to filling out the FAFSA form over privacy concerns (I probably won't fill it out for my kids; it will be a calculation of how much filling out that form is worth vs what the privacy is worth. Since I expect to get zero need-based aid, there's fairly little point in filling it out just to get loan interest deferment.)

Again tho, we're back to any loans over $5500 being private/unsubsidized which is, in the end, YOU borrowing for the kid.  Which was my point... that if you make enough, the availability of student loans to YOUR KID (i.e. loans that the kid can take out with or without mom and dad's participation) is very limited.  And that loan (unsubsidized Stafford) is only going to be available if you do fill out the FAFSA. 

[sokoloff]

We both clearly seem to understand the situation.

We seem to differ on whether this means loans are available for the kid to attend college.

The former point is more important than the terminology point.

[shawndoggy]

We both clearly seem to understand the situation.

We seem to differ on whether this means loans are available for the kid to attend college.

The former point is more important than the terminology point.

My very important point is that for those who say "well if I don't fund it then Jr. can go out and borrow if he wants to go to big money college (or State U in many cases)," they are wrong unless the total cost of attendance is $5500 a year or less (i.e. pretty much nowhere).

Your kids will be saddled with your high income.  Even if they want to get into debt up to their eyeballs, they can't, without your participation (they can't even borrow the first $5500 on their own without parents filing the FAFSA).

[C-note]

<snip>

Your kids will be saddled with your high income.  Even if they want to get into debt up to their eyeballs, they can't, without your participation (they can't even borrow the first $5500 on their own without parents filing the FAFSA).

Couldn't agree more.  FAFSA requirements allow very few to claim independent status at 17/18 years old.

https://studentaid.ed.gov/sa/fafsa/filling-out/dependency
 

[pbkmaine]

We told DH's 3 daughters that we would give them 4 years at a state school or the equivalent $ amount if they chose to go out of state. The middle one earned a significant scholarship, and we gave her the extra for grad school.

[Goldielocks]

I am very close to this "issue" right now.   We have saved for both kids for tuition and books at a local school, while they live at home, 4 years.  They will need to earn the rest of money if they choose to live away from home, or to have more than 4 years (or get a loan after 4 years).

DD has now received scholarships amounting to three years of tuition... (have not heard back from half the ones she applied to).   Discussing with DH now, but I am thinking to hold it until she is 24, then put it into a TFSA for her, to use for retirement, start a business, etc.

DS will be 22 by then, so our total costs will be known.

TLDR:  The money is hers, we will just keep it until she has something to spend it on that we agree to.  (Start a business, wedding, retirement, buy a car, first property downpayment, etc.)

[shawndoggy]

Congrats Goldielocks, sounds like a great problem to have!

[TabbyCat]

I would give it all to the kid, but work to encourage good choices (saving and/or investing, spending on further schooling, etc). If I didn't think they could make good choices yet, I would invest it and have all the money and earned interest slated for them in future. 

[mxt0133]

TLDR:  The money is hers, we will just keep it until she has something to spend it on that we agree to.  (Start a business, wedding, retirement, buy a car, first property downpayment, etc.)

So I guess the money is not hers then, because if she want's to spend it on something you don't approve of you won't give it to her.

Back to the OP's topic, this has definitely help me define how I will help our kids if we choose to when it comes to their college education.  Our strategy is to invest in their education now, by having my wife be a SAHP, homeschooling, paying for extracurricular activities like camps and educational programs.  We feel that if we invest in their abilities now, it will improve their chances of getting scholarships or significantly reduce their college costs by passing AP exams, taking CLEP tests, or high school dual enrollment to have them earn college credits at lower costs.

We will assist them as best as we can to help them figure out how to get a college education as cheaply as possible, we might pay for some of it, but saving a set amount and then giving it to them if they don't use it is off the table.

[accolay]

I don't have kids, but if/when I do I'll be saving money for their education, but I probably wont tell them about it.

I'll go with what JL Collins did if my kid is academically inclined. I'll pay for their school and help them along the way, but I don't think I'll give them the chunk of cash to spend. I think they'll learn better life skills being a poorer, but funded student.

[seattlecyclone]

I think maybe somewhere in between "giving it all to them" vs. "keeping it all" could work out nicely. Tell your kid when they apply to school: "we've saved $x for your college expenses. Totally fine if you need to use it all, that's what we saved it for. But if there's any left over, we'll give you half as a graduation present." Gives them some incentive to keep their costs down, without facing the prospect of giving the entire sum to them.

[daschtick]

If your child is smart enough to win a full scholarship, they must be at level of maturity that is higher than your average duck.

My daughter is currently 16, and I regularly share what her 529 balance with her, as I want her to learn about power of compounding interest. (I also have a separate brokerage account her also, which is comprised of mainly birthday and holiday money.)

We are very open about finances, and she knows that we will not be signing for college debt  for her,  However, I also want her to understand the results of her choices in life.  That said, I have indicated that if she is careful about how she chooses her path through college, (i.e state schools, living at home the first year or 2, etc), that if she had money leftover in the 529 after she graduated, that I would pay the taxes and penalty, and sign the balance over to her to begin an IRA, and to provide her with some cash to start her life debt-free.  She is understands this very clearly, and is beginning to chart a path.

I think that many kids don't receive proper guidance with finances, as their parents are just as financially illiterate.  Because of this, they accept going into debt for college as 'normal', and are not mature enough to understand the damage this causes to their future.

[MrsPete]

We lived this situation ... except the scholarship paid about half instead of everything. 

In our case, we used the saved money for some "college splurges" that wouldn't have been possible otherwise.  The biggest thing:  we bought our daughter a late-model used car when she started nursing school as a junior (really was a need).  We paid for her to move from the dorms to an apartment in her last two years of college.  And we paid for a mandatory summer school semester between sophomore and junior year, which we hadn't realized ahead of time would be a requirement for nurses (that summer semester was almost as expensive as a regular semester, and no scholarships cover summer school). 

Our youngest also earned some scholarship money, but she's still at home, having opted to begin with community college.  We consider her scholarship earnings "banked" and will "splurge" for her somewhere ... when it seems appropriate. 

I have a friend who told her kids early on (like when they started high school) that they were able to pay cash for college ... but if they earned scholarships and decreased the bills, they'd receive 1/2 that dollar amount on graduation day ... a nice big check with which to start their professional lives.  Though they're all super smart kids and worked at it, none earned even a dollar of scholarship money -- not an unusual situation.

[MrsPete]

It's already set aside for the child.  If the child doesn't need it for school, I'd likely move it into a retirement account.

When our oldest graduated from college, we started (small) retirement accounts for both kids ... and gave them both a book about saving.  I'm glad to say that both took the topic very seriously and have added to their accounts. 

[MrsPete]

My parents guaranteed that my sister and I would get our bachelor's degrees with no debt.

We told our kids basically the same thing:  We would make it possible for them to earn a bachelor's degree without any debt ... but it was a shared responsibility.  Our part was saving money literally before they were conceived.  Their part was working hard to earn grades /trying to earn scholarships so the money would stretch. 

We also made it clear that we would only pay four years of education, and that we expected to see good grades /progression towards graduation every semester.  We talked more about "We will cover tuition at a state school" than about "We have X number of dollars for your education."  In our state, all our state schools are roughly the same cost, and we weren't willing to pay for a private school ... so this worked out well for us and seemed appropriate for them at age 17-18.

Both of our kids have made us proud.  One's out of school, and the other's finished two years.  I really think a part of their success is due to the fact that we made our expectations crystal clear. 

[MrsPete]

I have a toddler and we do plan on saving for college. However, we won't be telling her about the fund until probably after she finishes college. Why? That way she has the experience of the value of the money and having work part time through college for spending money but will benefit for a nice surprise/boost after graduating. We will encourage to go to the school she chooses and to use good judgement on costs.

I don't see the reason to tell kids they have money waiting on them or to bank on it. I want her to get scholarships and figure out how to get it done without knowing mommy and daddy's money is there. A big chunk of money in the bank seems like SO much and endless to Kids that age when it gets sucked up quick with ridiculous cost of tuition and books.

I also wouldn't sacrifice my retirement savings for college. You can't get loans for retirement. (Not saying you are)


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I disagree with the idea of withholding information about college savings.  High school kids have enough trouble making decisions about college (financial and other) when they have all the information ... don't make it harder for her to make good choices.  Instead, make it clear what you expect and guide her towards good decisions (based upon her high school grades, talents, abilities). 

I know a couple people who've had their kids take out student loans for their entire education ... with the parental promise that they'll pay off the loans if they graduate on time (or whatever seems appropriate to the parents).  Don't finish?  Don't finish on time?  Don't make the expected grades?  They're your loans. 

As for earning scholarships, keep in mind that's not entirely under her control.  Even some of our best-of-the-best high school scholars don't earn scholarships.  And others earn admission to prestigious colleges, yet are only offered scholarships from lesser schools ... which leads to touch choices. 

I agree with you that seeing $$$ can seem like SO MUCH MONEY to an 18-year old.  That's where she will need your guidance.  Look at numbers together and be sure she's clear on just how much tuition + books + lab fees + dorm + meals actually costs. 

But let her make decisions with all the cards on the table. 

[MrsPete]

You can't get loans for retirement. (Not saying you are)

If you make enough, your kids won't be able to get loans for college either.

Oh, they'll be able to borrow. Any college kid can borrow.  We were required to fill out the FAFSA so our kids' qualify for certain scholarships (even though we knew we'd never be given any grants) ... and they were offered loans.  In fact, we had some trouble in our oldest's first semester because we didn't realize you have to officially refuse loans offered through FAFSA. 

Both my kids have received multiple, multiple offers of unsolicited loans.  I really do understand how so many people end up borrowing ... at some point, most kids are going to receive an offer at a weak moment and will say, "Oh, why not?" 

For a family of 4 with two kids in college, making 200000 a year with 500000 in assets and 125000 in home equity, the EFC (expected family contribution) came out to 39,441 per year.  So that's the annual amount that the family is expected to come up with ANNUALLY before eligibility for any federally subsidized loans.

Eh, we earn less but have greater assets ... I don't remember our EFC ... but our kids were offered federally subsidized loans. 

[MrsPete]

I think that many kids don't receive proper guidance with finances, as their parents are just as financially illiterate.  Because of this, they accept going into debt for college as 'normal', and are not mature enough to understand the damage this causes to their future.

I totally agree that many kids don't get enough guidance, and many see debt as "normal".  Many of our kids haven't been taught to be resourceful, haven't been taught to consider other options -- and plenty of options in terms of paying college costs.

[MrsPete]

So I guess the money is not hers then, because if she want's to spend it on something you don't approve of you won't give it to her.

I have no problem with that.  I'm the one who scrimped and saved and did without ... so those college funds would exist.  In my own daughter's case, I was glad to distribute those funds for things I deemed appropriate:  That mandatory summer school semester, a necessary car ... but, to give an example, while she was in college she wanted to take a trip to another country to visit a guy she'd met online.  I did not give her money for that; she did take the trip -- but she worked for it, so she understood just how many hours went into that plane ticket.  Incidentally, they're married now, and I adore him, so she made a good choice. 

[shawndoggy]

Oh, they'll be able to borrow. Any college kid can borrow.  We were required to fill out the FAFSA so our kids' qualify for certain scholarships (even though we knew we'd never be given any grants) ... and they were offered loans.  In fact, we had some trouble in our oldest's first semester because we didn't realize you have to officially refuse loans offered through FAFSA. 

the FAFSA is a the Free Application for Federal Student Aid.  So the application doesn't offer aid/loans, your financial aid office at the college does.  The aid office should've advised about the deadline to accept or reject the loans.  Both of my kids' aid offices have done that.

Both my kids have received multiple, multiple offers of unsolicited loans.  I really do understand how so many people end up borrowing ... at some point, most kids are going to receive an offer at a weak moment and will say, "Oh, why not?"

Eh, we earn less but have greater assets ... I don't remember our EFC ... but our kids were offered federally subsidized loans.

This is NOT true if your EFC exceeds the cost of attendance (other than the $5500 unsubsidized stafford loan discussed above).  Which was my point -- if you make enough, loans won't be available to your kids... at least not loans that are sufficient to pay for almost any four year institution.  Private loans may be available to you and your kid (mom and dad as cosigners) but not to just the kid.

And believe me, you don't need to be making Bill Gates money for your EFC to far exceed the true cost of attendance, especially for moustachians with low housing expenses and high savings rates.